Based on each question below, use your best judgment to respond to all questions within the

prompt. Partial credit will be provided for each prompt/question so be sure to include your

thought processes in answers.

1. Street Kicks, LLC, a sneaker company, receives a $1Million investment from an investor.

Which of the following best describes the journal entry for Street Kicks, LLC to record the

transaction?

A. Debit Cash; Credit Loan

B. Debit Cash; Credit Capital Stock

C. Debit Capital Stock; Credit Cash

D. Debit Capital Stock; Credit Loan

E. None of the above

2. Which of the following is not an objective of financial reporting?

A. Provide information useful in assessing amount, timing, and uncertainty of future cash

flows.

B. Provide information useful in making investment and credit decisions.

C. Provide information about economic resources, claims to resources, and changes in

resources and claims.

D. Provide information to guarantee the enterprise achieves its goals, objectives, and

mission.

3. Which equation below best represents the relationship between the income statement and the statement of financial position?

A. Ending Retained Earnings = Beginning Retained Earnings + Dividends - Net Income

B. Ending Retained Earnings = Beginning Retained Earnings + Net Income + Dividends

C. Net Income = Ending Retained Earnings - Beginning Retained Earnings + Dividends

D. Both A and B

E. Both B and C

4. On December 1, 2021, Rajeet's company purchases $20,000 of inventory on credit. On

December 30, 2021, Rajeet's company pays cash for the inventory originally purchased on

credit. Which of the following best describes the total change in account balances during 2021?

(Note: Assume there were no other transactions during 2021.)

A. There was no change in Accounts Payable, Cash, or Inventory.

B. Cash and Accounts Payable increased, but Inventory did not change.

C. Cash and Accounts Payable decreased, but Inventory increased.

D. Cash decreased, Accounts Payable did not change, and Inventory increased.

E. Cash increased, Accounts Payable did not change, and Inventory decreased.

5. The amount by which revenues exceed expenses

A. Net Income

B. Total Assets

C. Cash flows from operating expenses

D. Net Loss

E. Dividends

6. A current asset is

A. the last asset purchased by a business

B. an asset which is currently being used to produce a product or service

C. presented below non-current assets on the statement of financial position

D. usually found as a separate classification in the income statement

E. expected to be converted to cash or used in the business within one year or one operating

cycle, whichever is longer

7. The accounting equation may be expressed as

A. Assets = Stockholders' Equity - Liabilities

B. Assets = Liabilities + Stockholders' Equity

C. Stockholders' Equity = Assets + Liabilities

D. Assets + Stockholders' Equity = Liabilities

E. Liabilities = Assets - Stockholders' Equity

8. Which of the following is generally not considered one of the general purpose financial

statements issued by a corporation?

A. Budget forecast.

B. Balance sheet.

C. Income statement.

D. Statement of cash flows.

9. All of the following are characteristics of management accounting, except:

A. Reports are used primarily by insiders rather than by persons outside of the business

entity.

B. Its purpose is to assist managers in planning and controlling business operations.

C. Information must be developed in conformity with generally accepted accounting

principles or with income tax regulations.

D. Information may be tailored to assist in specific management decisions.

10. Net income will result if gross profit exceeds:

A. Cost of goods sold.

B. Operating expenses.

C. Purchases.

D. Revenues.

E. Cost of goods sold plus operating expenses.

11. Which of the following best represents a cash flow from investing activities for Company

ABC?

A. A shark invests $50,000 into Company ABC in exchange for 20% equity

B. Citibank provides a loan of $100,000 to Company ABC

C. Company ABC purchases a factory for $2 Million

D. Both A and B

E. Both A and C

12. Which of the following is not necessary to calculate a company's Working Capital:

A. Cash

B. Accounts Payable

C. Revenues

D. Inventory

E. All of the Above are necessary

13. The primary purpose of the statement of cash flows is to

A. provide information about the investing and financing activities during a period.

B. prove that revenues exceed expenses if there is a net income.

C. provide information about the cash receipts and cash payments during a period.

D. facilitate banking relationships.

14. Which of the following is true about preparing a statement of cash flows:

A. The total dollar value of net cash flows provided by operating activities are the same

whether preparing the statement of cash flows using either the indirect method or the

direct method

B. Publicly traded companies preparing the statement of cash flows using the indirect

method are also required to prepare cash flows provided by operating activities using the

direct method

C. The total dollar value of net increase (decrease) in cash are the same whether preparing

the statement of cash flows using either the indirect method or the direct method

D. Both A and B

E. Both A and C

15. Which of the following is not necessary to calculate a company's Quick Ratio:

F. Cash

G. Accounts Payable

H. Accounts Receivable

I. Inventory

J. All of the Above are necessary